Interest rate rise a test for Beazley as much as Costello

Reporter: Michael Brissenden

KERRY O'BRIEN: Today's interest rate rise caps off a bad couple of months for the Government. But politically, the rise will be as much a test for Opposition Leader Kim Beazley as it will be for the Prime Minister. Mr Howard and Treasurer Peter Costello both say the economy is still in fine shape. But you'd think even they would be starting to worry about the political impact of steeper mortgage payments coupled with those higher petrol prices.

But with his leadership once again in the spotlight after another bad opinion poll this week, Mr Beazley also knows that having failed to capitalise on a range of negative headlines for the Government in recent weeks, he has to be seen now to use the political gift this rate rise represents to improve his and Labor's public standing. Coincidentally, he was scheduled to deliver an important speech to the National Press Club today to jettison some of Mark Latham's perceived policy baggage from the last election. Political editor Michael Brissendon reports:

MICHAEL BRISSENDEN: This week marks the point where we become closer to the next election than we are to the last. The official campaigns themselves typically last five or six weeks, but Kim Beazley says the campaigning for 2007 has already begun.

KIM BEAZLEY: We have two fundamental budget rules that we are following at this moment.

SONG: I've got another plan, this time it'll work...

KIM BEAZLEY: They'll look at me and they'll say, "Yes, he can do the job".

MICHAEL BRISSENDEN: In fact, Kim Beazley's already released as many as six policy blueprints and there's perhaps a dozen more to come. And today at the National Press Club, he delivered his big vision for lifting and rewarding middle Australia. But the real question is: is anybody taking any notice?

MICHAEL BRISSENDEN AT HR NICHOLLS SOCIETY GATHERING: Your speech was strong on rhetoric of uplifting middle Australia and all the rest of it. But the polls suggest that middle Australia isn't listening at the moment. And the Government hasn't had a particularly good run this year so far, you know - the AWB scandal, the Kovco mix-up, petrol prices on the rise, interest rates going up again today. Can I suggest to you that the interest rate rise again today is perhaps as double-edged sword and if you can't make headway in the polls after that, then your position might be in trouble?

KIM BEAZLEY: I'll be leading the Labor Party to the next election, you can be sure of that. And I'll be leading them with a platform and a program that is aimed directly at middle Australia and the injustices that the Howard Government has inflicted upon them. I'll tell you, there's something about voters. I've been in politics a long time now. When they make up their minds, it's in the last few weeks. If somebody is going to change his or her mind from Liberal to Labor, that's a very big decision. It's big decision going back the other way, too. Some do it. Most don't.

MICHAEL BRISSENDEN: And this week's Newspoll bears that out. Despite a tough few months for the Government, still struggling to sell its unpopular IR changes, Kim Beazley appears to be making little progress. His personal support level has fallen to just 24% - behind both his frontbenchers Julia Gillard and Kevin Rudd. Labor's primary vote has fallen to just 37%, well short of the numbers needed or expected even at this time of the electoral cycle. All of this predictably enough, has set the tongues wagging. Some in the party and labour movement are privately expressing concerns again about Kim Beazley's performance. And his likely successors - should it come to that - are both quietly attracting some favourable publicity, all the while continuing to profess the sincerest loyalty.

KEVIN RUDD, OPPOSITION FOREIGN AFFAIRS SPOKESPERSON: Kim will be our leader at the next election because he's done a great job as leader so far.

KIM BEAZLEY: I would trust Kevin Rudd as Foreign Minister of this nation and that's what he'll be - Foreign Minister. I will be leading the Labor Party to the next election and we will be winning that election.

MICHAEL BRISSENDEN: Once again, though, the polls at this stage show he'd even have trouble beating Peter Costello. For the first the time, Kim Beazley's personal rating has been overtaken in the preferred prime minister stakes by the Treasurer. So does Peter Costello think he's got the Labor leader's number? Even he's being unusually coy.

PETER COSTELLO, TREASURER: Oh, I think I'll let that ball go through to the keeper.

MICHAEL BRISSENDEN: At this stage, you'd have to say that's probably the most unlikely contest at the next poll. The Prime Minister still doesn't look like moving on, and despite the bravado, Kim Beazley's position is far from secure. The next few weeks will also be extremely important. His budget reply will be closely watched, as will the next few polls, of course. But while the future is undoubtedly crucial, so too is the past, and today he came to bury those bits of it that might still bury him.

KIM BEAZLEY: You'd all be aware that Labor took to the last election a policy to cut funding to about 70 non-Government schools. I'm going to change that policy. I'm absolutely convinced that the modern Labor Party should be all about improving Australian schools, not attacking them. That's why I won't take money from Australian schools.

MICHAEL BRISSENDEN: And so today, it was out with Mark Latham's divisive schools' policy and his Medicare Gold as well - the two key platform of the Latham experiment. Whoever leads the Labor Party in 2007, alongside industrial relations, the economy is sure to be front and centre in the campaign. And with interest rates creeping up and petrol prices on the rise possibly contributing to inflation, there will finally with some fertile ground on this front for the Opposition. Even so, some things in Labor's past will still prove harder to shovel underground and will no doubt be continually unearthed. On a day that saw rates rise 25 basis points, the Treasurer still found plenty of blue sky to point to.

PETER COSTELLO: Under this Government, mortgage interest rates have been as low as 6% and as high as 10.5% when we were elected. 7.5% is around about midpoint between those two areas. Mortgage interest rates under the previous government averaged 12.75%.

MICHAEL BRISSENDEN: We'll hear a lot more of that for sure. But the Fact is, Australian families are more heavily geared than they've ever been and another point or two now could cause even more grief than the dark days of 17%. Next Tuesday, Peter Costello hands down his 11th budget. There'll be a big surplus, there'll more than likely be some small tax cuts and there will be a lot of talk, as usual, about economic responsibility. Mr Costello will once again be hoping this will be his last budget as Treasurer. Kim Beazley will be hoping it won't be his last as Labor leader. He'll certainly be looking to this budget reply to finally start shifting the voters his way. Well that's the plan, anyway.